Commerzbank CFO Says Share Drop Due to Unfounded Shipping Angst

July 4 (Bloomberg) -- Commerzbank AG, the biggest loser on
Germany’s benchmark DAX Index this year, has recently steepened
its decline because of unfounded speculation about risks in its
shipping portfolio, said Chief Financial Officer Stephan Engels.

“The stock retreat isn’t at all fundamentally justified,”
Engels, 51, said today in an internal memo to staff obtained by
Bloomberg News. “There’s renewed speculation about risks in our
shipping portfolio. We on the management board find that
incomprehensible.”

Commerzbank is selling assets and allowing loans to expire
to comply with European Union requirements for 18.2 billion
euros ($24 billion) in state aid the Frankfurt-based firm
received in 2009. That portfolio, comprised of credit to
shipping companies hit by oversupply in the freight industry as
well as commercial real-estate loans and sovereign debt, is
loss-making.

The shares have fallen 6.8 percent this week, extending
losses this year to 42 percent, after a June 26 Dow Jones
Newswires report raised speculation that offers for loans the
bank plans to sell would require writedowns on its shipping
portfolio. The stock rose 7.2 percent as of 4:35 p.m., after
reaching a record intraday low earlier in the trading session.

“We’ve always said we expect unchanged high risk
provisions for 2013,” Engels said. “Nothing has changed about
that except that today I’m actually a bit more positive than I
was a few months ago, as are other market participants.”

Engels said the speculation triggered “market technical
reactions” that forced some shareholders to sell in order to
comply with their own investment rules, according to the memo.

Repossessing Ships

Commerzbank also fell along with other financial stocks on
concern related to a potential resurgence of Europe’s sovereign
debt crisis and the European Central Bank’s plan to evaluate the
financial health of banks, he said in the memo.

Commerzbank’s press department declined to comment on the
contents of the memo.

The lender, whose soured shipping loans prompted a ratings
downgrade by Standard & Poor’s in May, is repossessing ships
from its debtors as it tries to salvage some of the 4.5 billion
euros it holds in bad debt from the crisis-hit industry.

It’s holding off on a sale of the vessels until values
recover, Stefan Otto, the head of the shipping unit, said in an
interview with Bloomberg News published on June 13. The bank is
focusing on ships in which it sees “significantly more upside
than downside,” Otto said at the time.

Commerzbank, which had shipping loans of 18 billion euros
in the first quarter, became the world’s second-biggest
financier of ships with the 2009 acquisition of Dresdner Bank.